In a recent dispute, International Transport Intermediaries Club (ITIC) helped a naval architect to successfully reduce the level of a claim by a shipbuilder for damages and loss of profits following the sinking of a hydrographic survey vessel which was deemed to be unstable.

The naval architect was appointed by the builder to approve the vessel’s design and stability in accordance with prescribed standards. The naval architect surveyed the vessel, conducted a stability test, and issued the necessary certificates of compliance, confirming that the vessel conformed to the relevant standards.

The vessel was then put through sea trials during which it capsized, resulting in significant damage. The buyer rejected the vessel and ended discussions about the possible purchase of a number of other vessels from the same builder.

Following the capsize, the buyer and the relevant maritime safety authority commissioned separate reports from two other naval architects, who both deemed that the vessel did not meet the required standards. The builder brought a claim against the naval architect for approximately $2m., representing direct losses allegedly suffered as a result of the incident and a large loss of profits claim in respect of the buyer’s decision not to have further vessels built.

After proceedings were issued, the parties agreed to conduct a repeat of the stability test, which showed the vessel to be unstable and confirmed that compliance certificates should not have been issued. After negotiation, the claim was ultimately settled for $250,000. This reduced settlement was achieved because the builder was unable to provide evidence that further build contracts would have been placed.